What Changed for the R&D Credit in Trump's One Big Beautiful Bill Act?

On July 3rd, the House passed the budget bill President Trump has dubbed the “One Big Beautiful Bill Act”. Tucked within the OBBBA (Section 70302) is a massive boon for U.S. corporations. While it’s not a full reinstatement of the old way of expensing R&D, the OBBBA dramatically improves the playing field.

The New Reality

1. While international R&D expenses will still need to be amortized over 15 years, domestic R&D expenses can once again be deducted from current year revenues, starting in the 2025 tax year.
2. Companies that had begun capitalizing domestic R&D expenses from 2022 to 2024 can now elect a Catch-Up Deduction, in which they deduct all the remaining unamortized R&D expenses in a single year. This deduction can be made in the 2025 tax year, and can significantly improve cash flow by lowering their tax burden.
3. Eligible small businesses may choose to retroactively apply a full expensing of their R&D to all tax years beginning with 2022, which will allow them to amend prior returns and recover amortized costs they’d already spent.

What This Means for You

The mechanics of how to maximize your R&D credit is complicated, but the tax experts at Neo.Tax can walk you through the process and help you take advantage of this unprecedented opportunity.

Many in Silicon Valley had been loudly calling for Section 174 to be changed back to its pre-TCJA form. After plenty of deadlock in Congress these last few years, it’s finally happened. So it’s more important than ever to understand the best way to be strategic when it comes to R&D.